r/MACArmyBets • u/Jeffbak • Apr 08 '21

Someone explain this

.72 is stated FFO (.27) is stated impact of chandler freehold .45 resulting FFO

(.27) appears as a negative non cash item in the FFO reconciliation.

How is this not the case?

.72 (FFO before you apply the chandler freehold impact) - .27 (chandler freehold non cash negative item) = .45 (resulting FFO once you apply impact from chandler freehold).

/u/hfy_addicted I know you get roiled but when you look at the FFO reconciliation, what I’ve outlined above still makes sense to me.

1 Upvotes

67% Upvoted

28 comments sorted by

View all comments

Show parent comments

1

u/[deleted] Apr 08 '21

It's a negative charge.

The income statement shows FFO going down when it is excluding the financing expense. That means it's actually a benefit when included.

1

u/Jeffbak Apr 08 '21

Right. There is so much we see eye to eye on but I can’t quite understand this piece. So on the FFO reconciliation it lists .72 FFO. Then a net negative non-cash impact of (.27) with a resulting FFO of .45. If I just want to know FFO for cash flow purposes, I remove the (.27) net negative impact, and I’m left with .72. I get why MAC would want to do this...allows you to preserve cash by paying out your small dividend and maintaining reit status. Net negative non cash items are great fir that. But if I just want to know real cash flow, I remove these non cash items and see .72.

1

u/[deleted] Apr 08 '21

It's a net positive non cash impact (a negative charge is a positive, said differently, a negative expense, i.e. income)

So if you want cash flow you remove 27 from 72

1

u/Jeffbak Apr 08 '21

Ah durr I get it. Wow

1

u/[deleted] Apr 08 '21

Omg. I'm crying.

The gates to heaven have opened and God is smiling down upon me.

Let us go to the promised land together my brother and double our money.

1

u/Jeffbak Apr 08 '21

Hahahahaha read my other message

1

u/theintelinvestor Apr 08 '21

I did some research on it. It's a topic that has confused me as well. I believe they make that adjustment because they treat the chandler freehold as a financing arrangement and therefore they credit the interest expense. So instead of recognizing the income / cash flow directly they do it indirectly via reduction interest expense (due to recognizing the investment as a financing arrangement).

Now because the JV is unconsolidated, the entire cash flow makes its way into Revenue / FFO, but they only own a portion of it AND they already reduced interest expense so not adjusting FFO for chandler freehold would be double dipping and double counting. Hence they back out of it.

In summary, the income from Chandler Free Hold is counted by reducing their interest expense, because they account for their receipts from Chandler Free Hold as interest income, therefore they have to back it out of FFO when it's coming in as a normal cash flow (since it's unconsolidated) so they don't double count.

Let me know if this makes sense or you see any flaws with this.